Bank of England Halts Long-Term Gilt Sales Amid Bond Sell-Off

The Bank of England is preparing to suspend sales of long-term government bonds to ease mounting pressure from high borrowing costs and steep taxpayer losses, according to a report from Investing.com. The policy shift halts the active offloading of 20- and 30-year gilts that were originally accumulated during financial crisis and COVID-19 lockdown market stabilization efforts.

"We shouldn't be doing quantitative tightening, we shouldn't be paying voluntary interest on printed money," said Richard Tice, Reform UK's deputy leader, regarding the central bank's debt management strategy.

The Cost of Quantitative Tightening

The planned suspension targets the quantitative tightening program launched to shrink the central bank's balance sheet. Economists estimate that selling long-term debt has cost taxpayers £22 billion since 2022. Projections from the Office for Budget Responsibility indicate that completely unwinding the total bond portfolio will cost roughly £100 billion over a five-year period.

Analysts at Deutsche Bank calculate that the central bank has been selling these long-term bonds through its quantitative tightening auctions at an average discount of around 50%. These steep discounts reflect broader market turmoil and depressed prices for long-dated sovereign debt.

G7 Borrowing Costs and Market Pressure

What is at stake in the adjustment is the stability of UK public finances amid elevated debt yields. The UK currently features the highest borrowing costs among G7 countries, with 10-year yields sitting at 5.25%.

"Changes to quantitative tightening would have real world consequences by easing cost-of-living pressures and interest rate rises," said William Ellis of the Institute for Public Policy Research think tank.

The expected intervention marks a notable policy pivot for the central bank as it attempts to balance inflation control against the severe fiscal drag of realized losses on its historical asset holdings.